The Central Bank of Nigeria (CBN) has directed First Bank and other banks under regulatory forbearance to temporarily suspend dividend payments, defer bonuses for directors, as well as halt investments in foreign subsidiaries or offshore ventures.
Forbearance refers to the temporary reduction or postponement of payments, such as for loans or mortgages, usually introduced to give temporary relief to individuals, and corporations, including financial institutions encumbered by financial straits.
As at press time, First Bank and others have not been released from regulatory forbearance.
The Director of Banking Supervision, CBN, Olubukola Akinwunmi, said in a circular issued at the weekend that the directive seeks to strengthen capital buffers and promote prudent capital retention across the sector.
The banking sector regulator, which also directed the affected banks to halt new investments in foreign subsidiaries or offshore ventures, stated that the fresh move targets lenders benefiting from forbearance on credit exposures and single obligor limits (SOL) — part of a broader transitional arrangement by the apex bank to stabilise the banking industry following macroeconomic shocks and sector-wide restructuring.
According to the CBN circular, the suspension will remain until the apex bank can independently verify the capital adequacy of the banks.
“This temporary suspension is until such a time as the regulatory forbearance is fully exited and the banks’ capital adequacy and provisioning levels are independently verified to be fully compliant with prevailing standards.
“This supervisory measure is intended to ensure that internal resources are retained to meet existing and future obligations and to support the orderly restoration of sound prudential positions,” the circular said.
The apex bank explained that it would continue to monitor compliance and work closely with affected institutions, adding that the move was designed to ensure that internal capital is retained to meet obligations and support a return to sound prudential footing.
The affected Deposit Money Banks (DMBs) are expected to comply fully with the new directive and adopt prudent capital management practices during this period.
This is not the first time the CBN has issued a regulatory forbearance in the financial sector.
Following the outbreak of the COVID-19 pandemic, the CBN on May 27, 2020, issued a regulatory forbearance to All Other Financial Institutions (OFIs), directed all DMBs in the country to restructure loan terms and tenors to households and businesses affected by the coronavirus outbreak.
Also, in April 2022, the banking sector regulator extended interest rate forbearance on loans by another year, in a bid to ease pressure on borrowers during COVID-19 recovery.
The CBN had also in September 2023 issued a circular prohibiting banks from using gains from forex revaluation for dividends or other capital expenditures, directing that such revaluation profits should be warehoused in a “Special Regulatory Reserve” until further notice.
The apex bank followed up in March 2024, warning banks against paying dividends using forex gains, especially given the temporary and volatile nature of such windfalls.
Ndubuisi Francis
Follow us on:
